If a Corporate Security Can Be Exchanged for a Fixed

question 38

Multiple Choice

If a corporate security can be exchanged for a fixed number of shares of stock, the security is said to be:

• A)callable.
• B)convertible.
• C)protected.
• D)putable.
• E)None of the above.

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Definitions:

Mutually Exclusive Projects

Investment opportunities where the acceptance of one project requires the rejection of another.

Cost of Capital

The desired return a corporation aims for in its investment activities to retain its market capitalization and lure in investments.

IRR

Internal Rate of Return; a financial metric used to evaluate the profitability of investments, indicating the annualized effective compounded return rate.

NPV

Net Present Value, a calculation to determine the value of a projected investment by subtracting the present value of cash outflows from the present value of cash inflows.